Key takeaways

Authority to manage and license the sale and purchase of goods and related activities of foreign-invested trading companies

Notably, to align with the decentralization and delegation principles outlined in Decree 146, the Draft Decree formalizes the following provisions:

• The requirement to obtain preliminary approval from the Ministry of Industry and Trade and other relevant ministries for issuing business licenses for retailing and other trade activities, and store establishment licenses for retail store establishment, will be abolished. This was previously mandated under Decree 09.
• Instead, the provincial people’s committees will be the competent authorities responsible for issuing business licenses and store establishment licenses, as well as overseeing, inspecting and managing the sale and purchase of goods and related activities of foreign-invested enterprises within their respective localities.

The reallocation of authority above aligns with the ongoing transformation of Vietnam’s governance model, aimed at streamlining administrative procedures, enhancing local autonomy and improving the delivery of public services.

Application for the business license and store establishment license when a domestic company turns to a foreign-invested company

The Draft Decree maintains the requirement that local enterprises that become foreign-invested enterprises (as defined in Article 23.1 of the Law on Investment 2020) following an acquisition by a foreign investor must comply with the conditions and licensing procedures applicable to foreign-invested enterprises when engaging in the sale and purchase of goods and related activities.

In particular, the Draft Decree introduces a 12-month transition period, during which the enterprise must complete the licensing process for obtaining a business license or store establishment license, as applicable. It remains to be seen whether an enterprise can apply for multiple licenses for multiple stores at the same time under the same application; otherwise, the 12-month period may still not be sufficient in practice.

Update on the economic needs test (ENT) exercise

ENT exemption

To align with Vietnam’s commitments under relevant international treaties, the Draft Decree includes a provision to abolish the ENT requirement for establishing additional retail outlets beyond the first one. This exemption applies to investors from countries or territories that are parties to international agreements in which Vietnam has committed to removing the ENT requirement, such as the EU–Vietnam Free Trade Agreement (EVFTA), the UK-Vietnam Free Trade Agreement (UKVFTA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This change will facilitate a more open and streamlined retail market entry for qualifying foreign-invested enterprises, including those from the UK and EU member states and other CPTPP members, such as Japan and Singapore.

ENT application

For cases not subject to the ENT exemption outlined in item (i), the application for the ENT for establishing additional retail outlets beyond the first remains generally the same as the provisions of Decree No. 09.

That said, the Draft Decree introduces the following notable additions:

• Given the current two-tiered state management structure, where the geographical market area at the ward level is relatively large, the Draft Decree provides clearer guidance on how market areas are assessed for retail store establishment:
  • For retail stores with an area of up to 5,000 square meters, the geographical market area will be assessed at the ward or equivalent level.
  • For retail stores exceeding 5,000 square meters, the assessment will be conducted at the provincial or city level.
• Consultations must be held with residents and existing retail stores in the area where a new retail store is proposed to be set up. However, the methods for conducting these consultations and the procedures for reporting the outcomes to the relevant authorities remain unclear at this stage.
• An evaluation of the geographic market area’s demand and the capabilities of the proposed retail store is required to determine the necessity of its establishment.

In short, while the introduction of the ENT exemption reflects Vietnam’s commitments under relevant international treaties and helps to streamline licensing procedures and timelines for retail store establishment by investors from member countries, the ENT criteria and implementation continue to impose administrative burdens on foreign-invested retailers from nonexempt countries. This presents ongoing challenges for those establishing physical retail outlets and expanding their retail networks in Vietnam.

Additional documentation requirements for applying for store establishment

The Draft Decree has introduced specific documentation requirements based on the size of the retail store.

• For retail stores with an area of less than 500 square meters, the application for a store establishment license must include either a Branch Operation Registration Certificate or a Business Location Registration Certificate. This means that the proposed retail location must be registered as a branch or business location of the company prior to initiating the store establishment process.
• For retail stores exceeding 500 square meters, in addition to the above certificates, an Investment Registration Certificate (IRC) is also required. While the Law on Investment 2020 does not explicitly mandate an IRC for retail store establishment, the Draft Decree appears to introduce this requirement for larger stores — a notable change in licensing obligations and procedures.

In brief, as the Draft Decree remains in its early stages of development, further regulatory clarifications are expected in the near future. We are actively following up with the relevant authorities and will continue to monitor updates in subsequent drafts before the new decree is officially circulated.

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Hang Tran, Senior Analyst, has contributed to this legal update.